AM Best assigns credit ratings to Popular Re with stable outlook

AM Best has assigned a Financial Strength Rating of B++ (Good) and a Long-Term Issuer Credit Rating of “bbb” (Good) to Puerto Rican reinsurer Popular Re, with a stable outlook.

The ratings reflect AM Best’s assessment of Popular Re’s strong balance sheet, adequate operating performance, limited business profile, and appropriate enterprise risk management (ERM).

However, the agency noted that the weak credit profile of its ultimate parent, Popular, Inc., “has a drag on the ratings lift/drag reflected in Popular Re’s ratings.”

Popular Re, which began operations in 2022, serves as the property/casualty reinsurer for Popular, Inc., Puerto Rico’s largest financial institution with branches also in the Virgin Islands and the US mainland.

The company participates in Popular, Inc.’s reinsurance program as both an insurer and reinsurer across various property/casualty lines of business, serving as a key component of the organisation’s risk management strategy.

AM Best highlighted Popular Re’s strong balance sheet, supported by very strong risk-adjusted capitalization as measured by Best’s Capital Adequacy Ratio (BCAR), a conservative investment portfolio, and favourable liquidity metrics.

The rating agency also noted the adequacy of loss reserves, carried at the actuary’s midpoint, though acknowledging the limited reserve history and the long-tail nature of some lines.

The adequate operating performance is primarily driven by investment income, resulting in modest after-tax measures. While the average combined ratio has been higher than peers in the initial phase, AM Best anticipates underwriting profitability for the company within the next year.

Popular Re’s business profile is considered limited due to its geographic concentration of risk, despite writing various financial and property lines for its parent company.

The company’s ERM is assessed as appropriate and is fully integrated into Popular, Inc.’s overall risk management framework.

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